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How to Hold Gold in Your Self-Directed IRA

  |  By Karen Walls

Times of severe market turbulence and uncertainty can trigger investors’ desire to hold something that is tangible.  In these circumstances, gold often emerges as a go-to investment.

We certainly saw this trend play out in the first quarter, when the stock market was rocked by volatility. According to the World Gold Council, gold had its best-ever start in the first quarter of the year, with demand growing 21%.

While investors may be familiar with owning gold in their taxable accounts, many do not think of also holding gold in their tax-advantaged IRA. Part of that may be due to the fact that many IRA custodians simply don’t allow account owners to hold precious metals in their retirement accounts. But gold and other approved precious metals can be held in a self-directed IRA, and these types of IRAs are often referred to as “gold IRAs” or “precious metals IRAs.”

Certain custodians are equipped to help investors hold gold in their self-directed IRA. As a self-directed IRA custodian, PENSCO enables our clients to hold gold in their retirement accounts[1], and we have the knowledge of and experience with IRS rules and regulations to help clients efficiently handle these transactions.

Here are some of the top questions we receive when it comes to holding gold in a self-directed IRA:

How does a gold IRA work?

Because PENSCO acts as a directed custodian and does not recommend or endorse any investments, investors must work directly with a precious metals broker to select which pieces or amounts of gold to purchase with their IRA funds. Once an investor has decided what to buy, he or she can open a PENSCO self-directed IRA. After that, the investor instructs us to open an account with a precious metals custodian qualified to hold precious metals for an IRA.  PENSCO works with Delaware Depository to house the precious metal for clients who use IRA funds to purchase gold. PENSCO will send the IRA funds to the broker, and Delaware Depository will then work with the precious metals broker to arrange shipping to their storage facility.

What types of gold IRA and precious metals IRA transactions are allowed?

Investors can diversify their portfolios with precious metals, such as gold, silver, platinum or palladium. But the metal must meet specific IRS requirements. For instance, you cannot buy just any collectible coins with your IRA dollars.

A MarketWatch article explains that IRAs are only allowed to own gold, silver, and platinum coins and gold, silver, platinum, and palladium bullion that meet certain purity standards. For example, an IRA can own American Gold Eagle coins, Canadian Gold Maple Leaf coins, American Silver Eagle coins, and gold and silver bars (bullion) that are 99.9% pure or better.

That means some well-known gold coins, including the South African Krugerrand, are off limits.

Before purchasing gold, it is always a good idea to consult with your financial professional to make sure your purchase doesn’t run afoul of any securities rules.

How do required minimum distributions work with a hard asset like gold?

Investors with traditional IRAs must start to take required minimum distributions, or RMDs, once they turn 70½. Account holders are required to remove a portion of assets from their IRAs each year as a distribution so the government can begin collecting taxes on your savings.

The most common distribution method is cash, which means the IRA either has to have cash available or securities must be sold in order to fulfill the distribution. A gold investor can sell a portion of their gold holdings to cover their RMD if needed or they can take a “distribution in-kind.” With a distribution-in-kind an investor receives the physical gold owned by their IRA.

Keep in mind that if you have more than one traditional IRA, you have the option of taking your RMD from just one account or from a combination of them. That gives you the option of selling some of your more liquid securities to cover your RMD if you prefer, meaning you may not need to touch your gold holdings to cover your RMD.

Self-directed IRAs provide you with the flexibility to invest your retirement funds the way you want. As a self-directed IRA custodian, it is our job to make the process of holding alternative assets — including precious metals and gold — as smooth as possible.

[1] PENSCO is not a precious metals dealer. All precious metal holdings are held at Delaware Depository Service Company, and PENSCO forwards the funds to complete transactions. 


Editor’s Note: This is an updated version of a post we originally published in August 2015. We welcome new comments and questions below.

PENSCO Trust Company performs the duties of an independent retirement custodian, and, as such, does not provide investment advice, sell investments or offer any tax or legal advice.  Clients or potential clients are advised to perform their own due diligence in choosing any investment opportunity as well as any professional to assist them with an investment opportunity.  Alternative investments are not FDIC insured and are subject to risk, including loss of principal.